Legal principle

A departmental circular cannot enlarge the exclusionary clause of a statutory exemption notification, and where an expression like 'agricultural product' is undefined, the common parlance and dictionary meaning apply, so a manufactured commodity distinct in name, character and use from its agricultural raw material is not itself an 'agricultural product'.

Court decision

The Supreme Court allowed the appeal and set aside both the High Court judgment dated 05.08.2019 and the Assistant Commissioner's order dated 09.01.2007, holding that: (i) circular No. 10/2004 dated 30.01.2004, insofar as it expands the exclusionary clause of notification No. 53/2003, has no legal consequence; (ii) crude degummed soyabean oil is different and distinct in character and identity from soyabean; (iii) the process of producing it from soyabean is manufacturing; (iv) it is not an agricultural product; and therefore (v) the appellant is entitled to the benefits of notification No. 53/2003. There was no order as to costs, and the Court declined further deliberation on the remaining (nexus) issues.

Facts

The appellant, a government-recognised two-star export house trading under the EXIM Policy 2002-07, was issued a duty free credit entitlement (DFCE) certificate for import of goods having nexus with its exported food products. It imported crude degummed soyabean oil under two Bills of Entry dated 26.07.2006 and 27.07.2006 (through MMTC), claiming duty exemption under notification No. 53/2003-Cus dated 01.04.2003. A show-cause notice dated 30.08.2006 from the Commissioner of Customs, Kachchh alleged that soyabean oil, being derived from an agricultural product, was excluded under the notification and that there was no nexus with the exported product group. The Assistant Commissioner, Kandla confirmed a duty demand of Rs. 1,00,38,321/- by order dated 09.01.2007, and the Gujarat High Court upheld the demand on 05.08.2019 in a writ petition, leading to this appeal by special leave.

Key provisions

• Section 25(1), Customs Act, 1962 — Power to grant exemption from duty
• Section 28AB, Customs Act, 1962 — [Omitted] ****
• Section 128, Customs Act, 1962 — Appeal to Commissioner (Appeals)
• Section 28, Customs Act, 1962 — Recovery of duties not levied or not paid or short-levied or short- paid or erroneously refunded